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Official Government Edition

The definitive report on what caused America's economic meltdown— and who was responsible

The financial and economic crisis has touched the lives of millions of Americans who have lost their jobs and their homes, but many have little understanding of how it happened. Now, in this very accessible report, readers can get the facts.

Formed in May 2009, the Financial Crisis Inquiry Commission (FCIC) is a panel of 10 commissioners with experience in business, regulations, economics, and housing, chosen by Congress to explain what happened and why it happened. This panel has had subpoena power that enabled them to interview people and examine documents that no reporter had access to.

The FCIC has reviewed millions of pages of documents, and interviewed more than 600 leaders, experts, and participants in the financial markets and government regulatory agencies, as well as individuals and businesses affected by the crisis.

In the tradition of The 9/11 Commission Report, The Financial Crisis Inquiry Report will be a comprehensive book for the lay reader, complete with a glossary, charts, and easy-to-read diagrams, and a timeline that includes important events. It will be read by policy makers, corporate executives, regulators, government agencies, and the American people.

I would describe the book as really two books. The first 40% or so is more of an analysis of developments in economy and finance over the 20 or so years leading up to the crisis of 08, and the last 60% is more of a narrative of the events of the crisis in the last half of 08. The latter portion heavily reminded me of Sorkin's book, Too Big to Fail. It similarly relies heavily on interviews with high level executives, officials and so on. I understand that, if you are trying to write something that you want the general public to read, you would opt for the chronological narrative of the second half of the report. However, having read Sorkin's book, I felt a little frustrated that there was little added insight here, considering the time, resources and investigative power the commission had.

As far as the analysis goes, it is decent enough if not particularly dazzling. There aren't a lot of surprises here if you have followed the issue over the past 2-3 years. There is nothing like the explosive effect of the Pecora report in the 1930's, on which this commission was modeled. I think that is in part due to the much more active media we now have now; compared to the 1930's, so much in here has come out more or less already.

The only real function that the analytical section performs is to package up what has already been disclosed and assert in a general way what weight should be given to what cause(s). Every factor gets mentioned and given some role; the different political appointees on the commission apparently disagree over how much weight should be given which factors. Although there seems to be a good deal of conversation about that disagreement in the blogosphere, having now read the report, it was frankly a little too general to me, and I have more sympathy for the dissenter who said, in effect, "if everything is a cause, nothing is". Although everything does get mentioned, a number of areas go unexplored in detail. For instance, on page 6, the report notes "The time-tested 30-year fixed-rate mortgage, with a 20% down payment,went out of style." But they never really explore why (fixed rate loans went out of style due to interest rate volatility in the late 1970s and early 1980s, and the down payment threshold was lowered for two reasons, (1) in the 1980s, advocates for expanding home ownership, such as ACORN, targeted that kind of mortgage as too restrictive, associated it with "redlining" and racism, and pushed for a lowering of origination standards to expand home ownership and (2) real estate developers lobbied for obvious reasons for the lowered downpayment).

The analysis section is a blend of organization by topic and by chronological narrative. This makes it relatively easy to read. However, it might have been more in keeping with the purpose of the commission, as I understand it, to have been less concerned with general readability and provide more quantitative analysis on each topic. I would have loved to have seen something more incisive, although it may be the nature of a commission report that throwing everything in is needed to get even 6 of the 10 to agree on the final text. It took decades for the economics profession to come up with a coherent evidenced account of the causes of the Great Depression, by which I mean Milton Friedman's, and perhaps that is just going to be the case here as well.

I felt the report does not display a good understanding of several areas that were particularly relevant. The chapter on Lehman, for example, begins with statements by the commission about valuation that are excruciating to read if you have worked on valuation analysis (valuation is an opinion about what something will bring in a particular context and thus valuations differ based on the context, especially depending on whether the context is one of an orderly market and orderly marketing into it, or if you are assuming a forced sale in a disorderly market). Similarly, they do not understand CDS's well at all. When they repeatedly describe AIG's CDS's as "new fangled" and so on, they demonstrate that superficial understanding. Credit default swaps are simply a means of credit insurance and financial institutions have been writing credit insurance since the Renaissance if not earlier, just with different documentation. That said, the commission does correctly understand the difference here was that AIG's CDS's were not written by a regulated insurer or financial institution that had to reserve capital against the exposure. At the same time, since regulators repeatedly and systematically failed, as the report says, where they did have jurisdiction, it is not clear that the mere fact of CDS regulation would have changed the outcome for AIG.

The report reads as if someone who wanted to be a novelist or journalist but was not very good was given responsibility for the final draft. There are too many passages that read like someone's attempt to spice things up for the sake of spicing them up. E.g. after laying out an analysis by Paul Krugman on the role of foreign capital in fueling the housing bubble, the report adds a one sentence paragraph: "It was an ocean of money". What a useful observation, huh?

In sum, I think the report is a fine generalist-level survey of the factors behind the financial crisis although not a source of much additional insight.

37 internautes sur 48 ont trouvé ce commentaire utile

1.0 étoiles sur 5UNREADABLE PRINT!!2 février 2011

Par Bob C - Publié sur Amazon.com

Format:Broché|Achat vérifié

WARNING: The print size and quality of this publication will make it unreadable to many people (as it is for me).

The main font is tiny, and the font for the footnotes is vanishingly small. The cheap printing method has also resulted in a font with very low contrast. A further problem is that the margins are narrow even near the spine, so the lines of print curve out of sight as you try to read them.

I am able to read all sorts of books and have reading glasses to do so, yet I am unable to read this book. The Amazon entry for this book should warn potential purchasers of the readability issue.

Unfortunately, the version of the report from the Government Printing Office uses the same format. This is a travesty.

For many people, the best choice at present is to download the entire report for free (as a single PDF). On screen, the print size can be adjusted at will. That is how I intend to read the report. If I need to excerpt some pages, I can print them from the PDF. Pages printed from the PDF at least have excellent contrast, even though there is no way to adjust the font size. The report can be downloaded here: [...]

In addition to the readability issue, potential purchasers should be aware that this Authorized Edition from PublicAffairs does not include the index to the report. The index must be downloaded (as a PDF) from the publisher's website.

This report spends over 500 hundred pages to reach a conclusion that basically targets the rating agencies as the main culprit in the economic collapse that is now referred to as the Great Recession.The real problem was the passage of legislation that eliminated the firewalls erected in the mid 1930's to prevent what happened .Three major problems can be identified.It is clear that if these three types of events had not occurred,then the Great Recession could have been prevented.

The three major factors making the Great Recession inevitable were (a) the repeal of the Glass-Steagall Act(GS) of 1933 in 1999 , (b) the passage of the Commodities Futures Modernization Act (CFMA) of 2000,and (c) the planned and organized restructuring of the American banking system ,started by Jimmy Carter in 1978,to create megasized banks through periodic waves of mergers,acquisitions and takeovers.It should be emphasized that the major supporters of these actions in the late 1980's to 2000 were Bill and Hilary Clinton,F D Raines,Rubin ,Summers, Senator Dodd,Barney Frank,Senator Schumer and the usual array of Libertarian Republican supporters of Wall Street casino capitalism ,such as Phil and Wendy Gramm.Repealing Glass Steagall allowed the private commercial banks to again set up investment bank units to engage in financial speculation.This was the primary problem that occurred in the mid to late 1920's.Highly speculative,leveraged ,margin account loans financed the stock market bubble while balloon payment loan financing of mortgages created the bubble in housing.This double bubble led directly to the Great Depression of the 1930's. The same type of double bubble led to the Great Recession of the 2000's,as well. The Japanese Great Recession of 1993-2004 was also the direct result of a double bubble in real estate and stocks.

The CFMA removed derivatives and credit default swaps(CDS's) from any regulation at the state and federal level.Derivatives,CDS's and CDO's(Collateralized Debt Obligations)played the role in the 2000's that margin account financing of stock options had played in the 1920's.The subprime mortgage loans game ,along with the constant efforts of Countrywide Financial and Ameriquest to convert the fixed rate mortgages of low income citizens to adjustable rate mortgages by constant refinancing,played the role of the balloon payments game of the 1920's .

6 internautes sur 7 ont trouvé ce commentaire utile

3.0 étoiles sur 5Smokescreen11 février 2011

Par Erik - Publié sur Amazon.com

Format:Broché|Achat vérifié

The FCIC's report begins with a tedious, disorganized rambling, with much unnecessary material, about the Commission's Mission and Background, Intentions of the Report, Impact of the Crisis, the Commission's actions, Limitations of Commission's Charter, what is in the Report, thank yous, and an unbelievably garbled set of pseudo-conclusions, without the headings, and without structure.

For example, the Commission carries on about what it wasn't asked to do - referencing TARP, the Transportation Safety Board, etc. It would have been sufficient to say "Congress did not ask the Commission to offer policy recommendations."

The crisis was caused, as has always been the case, by persons taking unreasonable, even illegal, risks in a quest for quick wealth. The impetus to pursue that quest arose from the Federal Reserve's easy money policy, not with standing the FCIC's protests to the contrary. They were allowed to take those risks, and allowed to infringe on the law, by recent administrations and by the US congress, who dismantled or thwarted prior regulations and their enforcement, and failed to adapt and enforce new regulations appropriate to new financial chicanery. The failures of administrations and congress were a consequence, in some cases, of pursuit of misguided ideologies, and, in others, simply the pursuit of office.

That is what the Commission should have concluded, and perhaps did, more or less, but you don't need 500 plus pages to do the job.

A English teacher from back in the day when we taught Latin and Greek in high school would give the report a D minus for composition. Well, we probably don't deserve any better.

What the Commission should have added, but didn't, is that it is not productive to fault those who took unreasonable or even illegal risks in their quest for wealth. They have made their character clear for millenia. They make no oath to behave otherwise. It is well established moral latin that we are obliged to take that character into account in dealing with them. Which we do by choosing representatives and executives, who do take an oath of office, to develop and enforce appropriate laws. It is our representatives and executives who failed us; who violated their oath of office. Of course, we put them in office. Nevertheless, the Commission wails about failure of corporate governance. Really.

There are so many faults with the report that it is hard to know where to begin.

For example, the Commission implied that monetary policy was not a cause. They said "Low interest rates and widely available capital were prerequisites for the creation of a credit bubble, and created increased risks, but did not need to cause a crisis." But, they failed to explore the connection between low interest rates and the desire for investors to find safe substitutes for US Treasuries. Wall Street came up with the supposedly safe substitutes, but they wouldn't have done that without a market. There is some discussion of the impact of low interest rates in one of the dissents, but it reflects poorly on the Commission as a whole that the subject wasn't thoroughly discussed in the body of the report.

Not that there was much thorough discussion of anything. Someone characterized the Report as a "clip job" and they are not entirely wrong.

As another fault, the Commission concludes that Fannie Mae and Freddie Mac "contributed to the crisis, but were not a primary cause," and that "they followed rather than led Wall Street." So, it was Wall Street's fault? What the Commission didn't pursue is that the ultimate cost to the taxpayer for Fannie and Freddie's behavior will run into the hundreds of billions - look it up - dwarfing the net taxpayer bailouts of everyone else.

The Report is more a smokescreen than a whitewash, but despite its many faults, the Report provides a collection of material that, with substantial additional research, analysis and most of all organization, yields an understanding of who did what to whom and why. If you really want to grasp the material, download the PDF, use Acrobat Full Version to break it into manageable pieces, and to convert them into word. Use the web site to follow up on the footnotes.

In the end, when we clear our way through the smoke, we find Congress at the root of the problem. And they still are - read the just released "Reforming America's Housing Finance Market." Then call your Senator.

3 internautes sur 3 ont trouvé ce commentaire utile

3.0 étoiles sur 5Pretty disappointing5 février 2011

Par Amy Lamar - Publié sur Amazon.com

Format:Broché

Like many, I have been following the parapatetic hearings of the FCIC over the past year, and while I didn't expect this report to be completely earthshattering, I also didn't it expect it to be so mediocre in terms of analyzing the myriad problems and, more importantly, recommending legislative, regulatory, and structural solutions. The only conclusion the report seems to draw, in the end, is "this is probably going to happen again," which is borderline pathetic. I wish the commissioners and staff had read some of the classics published in the wake of the 1929 stock market crash--like The Great Crash 1929 or Krugman's The Return of Depression Economics and the Crisis of 2008 and especially the original blueprint for this kind of commission report, Stock Exchange Practices: The Final Report of the Pecora Commission which at least makes for highly entertaining reading. Hopefully this won't be the last inquiry into the 2008 meltdown undertaken by the government. What we really need is a "truth and reconciliation" commission, to bring out ALL the facts and come to grips with what we REALLY need to do to make sure systemic weaknesses are addressed, and regulations (and regulators) in place to police the inevitable simple human greed and irrationality.